Skip to content
BOL Conferences
Thread Options
#2118929 - 02/21/17 03:32 PM Reducing Line for Overdraft Protection
peony Offline
Gold Star
peony
Joined: Mar 2013
Posts: 250
If a customer is reducing the line for their overdraft protection account, do we need to send an adverse action notice to them? Typically, we do when we reduce or remove the line for HELOCs but wasn't sure if overdraft protection accounts fall in the same category.

Thanks in advance!

Return to Top
Lending Compliance
#2118931 - 02/21/17 03:35 PM Re: Reducing Line for Overdraft Protection peony
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,226
Galveston, TX
"If a customer is reducing the line....".

If the customer is reducing the line, the bank is not taking any sort of adverse action against the customer.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2118932 - 02/21/17 03:37 PM Re: Reducing Line for Overdraft Protection peony
peony Offline
Gold Star
peony
Joined: Mar 2013
Posts: 250
What if in order to renew another loan, the customer is required to reduce the line? If the credit department is requesting to reduce the line in order to renew an loan, NOA would be sent since this is not per customer's request?

Return to Top
#2118939 - 02/21/17 04:00 PM Re: Reducing Line for Overdraft Protection peony
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,226
Galveston, TX
The customer can either agree to reduce the line or not depending on whether they want the new loan. If they do not, you owe them an adverse action notice for the current loan application. It is not the bank's decision.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2120323 - 03/02/17 09:18 PM Re: Reducing Line for Overdraft Protection peony
Renea Rush Offline
Member
Joined: Dec 2011
Posts: 74
I just had a question somewhat related to this subject. If the Bank is removing the availability of the line, due to account abuse, they need to give them adverse action notice right? Just the Reg B part, not the FCRA part correct? We are not closing the LOC just making the availability $0 until they manage to pay the balance off - then it will be closed.

Return to Top
#2120356 - 03/03/17 12:21 PM Re: Reducing Line for Overdraft Protection peony
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,226
Galveston, TX
Sounds like you are turning the account into closed-end credit and need to give them closed-end disclosures.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2120401 - 03/03/17 02:45 PM Re: Reducing Line for Overdraft Protection peony
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
due to account abuse, they need to give them adverse action notice right?

That would depend on the nature of the abuse. Look at Reg. B 1002.2(c) for what is and what is not adverse action.


Sounds like you are turning the account into closed-end credit and need to give them closed-end disclosures.

I'm not sure I agree with this unless I'm missing something. They are not converting (modifying) the account to closed-end credit. They are just terminating the borrower's credit availability due to the mishandling of the account and allowing the borrower to pay out under the existing terms.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#2120417 - 03/03/17 03:04 PM Re: Reducing Line for Overdraft Protection peony
Renea Rush Offline
Member
Joined: Dec 2011
Posts: 74
Thank you both

Return to Top

Moderator:  Andy_Z